The Reserve Bank of New Zealand and the Securities Commission today announced that the newly established NZCDC Settlement System has been declared a designated settlement system under Part 5C of the Reserve Bank of New Zealand Act.

The Reserve Bank and Securities Commission are joint regulators of designated settlement systems. The NZCDC Settlement System is operated by New Zealand Clearing and Depository Corporation, a wholly-owned subsidiary of NZX Limited.

Reserve Bank Head of Prudential Supervision Toby Fiennes, and Securities Commission Chairman Jane Diplock said the designation gives statutory backing to the finality of settlement and netting of transactions through the system so that in the event of failure by a participant, transactions cannot be unwound. Designated settlement systems are subject to ongoing oversight by the Securities Commission and the Reserve Bank. However, it is not compulsory for settlement systems operating in New Zealand to be designated.

New Zealand has two existing designated settlement systems: the Reserve Bank's Exchange Settlement Account System and the Continuous Linked Settlement System operated by CLS Bank International.

A settlement system will only be recommended for designation after a thorough assessment by the regulators, they said. The regulators assess, amongst other things, the clarity and legal certainty of the rules of a system, its financial soundness and risk management policies, and the capability and capacity of the operator.

Questions and answers on the new settlement system are available on the Reserve Bank website http://www.rbnz.govt.nz/finstab/payment/3816027.html